A U.S. bankruptcy trustee has urged a court to appoint an examiner to investigate transactions between EchoStar Corp. and its Hughes Satellite Systems unit, alleging potential self-dealing that may have stripped assets from the bankrupt subsidiary.
The U.S. Trustee filed a motion on Sunday seeking the examiner’s appointment, arguing that Hughes’ unsecured debts exceed the $5 million statutory threshold required under bankruptcy law. The motion will be considered by U.S. Bankruptcy Judge Alfredo Perez at a hearing in Houston on Wednesday.
Bondholders have alleged that EchoStar transferred more than $1.5 billion in assets from Hughes over the past two years through a series of transactions. Among the disputed deals is a December 2023 lease agreement under which Hughes entered into an uncompetitive lease for the Jupiter 3 satellite from an EchoStar subsidiary. The trustee also highlighted a $196 million tax reimbursement paid by Hughes to EchoStar, noting it was 15 times higher than in prior years.
Hughes, which filed for Chapter 11 bankruptcy protection in Houston on August 2, admitted to owing at least $774 million in fixed, liquidated, and undisputed unsecured loan debt. The unit estimated its total liabilities between $1 billion and $10 billion at the time of filing. In the first quarter of 2024, Hughes distributed over $1 billion in dividends to EchoStar, further fueling scrutiny over the financial relationships between the two entities.
White & Case, which has represented EchoStar since 2004 on non-bankruptcy matters, has been proposed as counsel for Hughes in the examiner process. The outcome of the hearing could determine the scope of the investigation and potential legal or financial repercussions for EchoStar and its subsidiaries.
